Kerala High Court
Mohan Industries And Ors. vs Deputy Director Of Industries And ... on 29 August, 1972
Equivalent citations: AIR 1973 KERALA 59, 1972 KER LJ 946 1972 KER LT 766, 1972 KER LT 766
ORDER M.U. Isaac, J.
1. The petitioners are manufacturers of candles among other things. The main raw material for the manufacture of candle is paraffin wax which is a petroleum product. Section 2 (a) of the Essential Commodities Act, 1955 (hereinafter referred to as the Act) defines "essential commodity". "Petroleum and petroleum products" is item (viii) in the above definition. So paraffin is an essential commodity as defined in the Act. The only source of supply of paraffin in this country is from Digboi Refinery in Assam State. Burmah-Shell and Esso Standard Eastern are its agents for distribution of the said commodity in India. As regards Kerala, Burmah-Shell makes practically the whole distribution through its sub-agent, Parry and Co., Cochin. Users of paraffin wax used to buy it mainly from Parry and Co., Cochin and also from other stockists. The petitioners herein were buying paraffin wax from Parry and Company according to their requirements.
2. In 1971, the production in Digboi Refinery was considerably affected due to floods and other calamities. Paraffin wax became scarce; and its price went up very much. Paraffin is a commodity used not only for manufacture of candles, but in many other industries. Black-marketeers began to exploit the situation; and it created real difficulties for the actual users of the commodity. The Central Government immediately recognised the position; and it took steps to bring the commodity under statutory control with a view to secure its equitable distribution and availability at fair prices. It drew up a scheme for that purpose and circulated the same to the State Governments, with instructions to be ready to implement the scheme pending issuance of the necessary statutory order. Ext. R-l dated 2-11-1971 is copy of D. O. letter sent by the Central Minister of Petroleum and Chemicals to the Chief Minister of this State. Pursuant to the instructions contained therein, the State Government directed the Director of Industries and Com-
merce to take necessary action. It is said that the Director of Industries and Commerce convened a meeting of the State Raw Material Advisory Committee on 4-12-197! to consider the matter, and that the Committee fixed an order of priority regarding the distribution, and further decided not to make any supply to candle manufacturers who established their business after 1-1-1972, unless there was surplus quantity. According to the decision alleged to have been taken by the Committee, candle manufacturers established prior to 1971 would get only 60% of their average consumption of paraffin wax, during the previous three years. It is further said that on the basis of the Committee's decision, a list of the persons permitted to purchase paraffin wax, and the quantity that each of them is entitled to buy was prepared and forwarded to Parry and Co., with a direction not to supply the said commodity to any person not included in the list and beyond the quantity mentioned therein. The counter-affidavit filed by the State does not disclose when this list was prepared, by whom it was done, or who sent it to Parry and Company and under what authority.
3. The petitioner in O. P. 1319 has established his business long before 1971. All the same he was refused any supply by Perry and Co., for the month of February 1972, on the ground that his name was not in the list. The petitioner in O. P. 1936 was not entitled to be included in the list according to the alleged decision of the Committee; and be was also refused supply by Parry and Co. The petitioner in O. P. 2071 alleges that he used to buy on an average 20.50 tons of paraffin wax per year from Parry and Co., but he was informed by the Director of Industries and Commerce by his letter dated 14-2-1972 that he had been allotted only 3.80 tons of wax for the year 1972. The petitioners were seriously affected by the above situation.
4. In the meanwhile, the Central Government, in exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955 made the Paraffin Wax (Supply, Distribution and Price Fixation) Order, 1972 (hereinafter referred to as the Paraffin Control Order) and published it on 4-2-1972 in the Gazette of India, Extraordinary. Clause 3 of this Order empowers the State Government to fix a declared price for paraffin wax; and clause 4 penalises sales in excess of the declared price. Clause 5, which is under attack in these petitions, reads-
"5. Paraffin wax not to be sold except under an allotment order issued by the competent authority, -- No dealer shall sell or cause to be sold paraffin wax to any person except in pursuance of an allotment order issued to such person by the competent authority of the area in which the dealer has his place of business nor shall the dealer sell or cause to be sold paraffin wax in excess of the quantity specified by the competent authority in the allotment order."
Clause 6 of the Order provides for declaration of stock by persons in possession of paraffin wax. Clauses 7, 8 and 9 deal with licensing of dealers. Clause 10 provides for appeal from certain orders of the competent authority. Clauses 11 and 17 confer certain powers on the Central Government to issue directions regarding production, maintenance of stocks, storage, sale, transport etc., of paraffin wax. Clause 13 provides for return of stock and particulars of sale. Clause 14 provides for display of particulars of stock, price etc., and clauses 15, 16 and 17 of the Order, deal with incidental matters. This in short is the scheme of the Paraffin Control Order. The Counter-affidavit of the State has stated that the Government has, by a notification dated 28-3-1972, authorised the Director of Industries and Commerce to perform the powers and functions of the competent authority under the Order.
5. O. P. No. 1319 was filed on 29-2-1972 without knowing about the Paraffin Control Order. In fact, the petitioner in that -case had no information at that time why a list of persons permitted to buy paraffin wax was prepared or his name was not included therein. All that he knew was what Parry and Co., told him namely it had been directed by the Deputy Director of Industries and Commerce, Trivandrum and the District Industries Officer, Ernakulam not to sell the above commodity to persons not included in a list furnished by them to the company. So, that writ petition was filed challenging the said list as offending the petitioner's fundamental right to carry on business. Subsequently, the said petition has been amended incorporating new grounds and additional reliefs. O. P. 1936 was also filed without any information regarding the circumstances under which the petitioner therein was not included in the list supplied to Parry and Co. He also sought to quash the said list on the same ground as raised in O. P. 1319. There is a further attack in that O. P. against the Paraffin Control Order as a whole on the ground that it is violative of Articles 14 and Clauses (f) and (R) of Article 19 (I) of the Constitution. This petition has also been subsequently amended by adding new grounds and seeking more reliefs. O. P. No. 2071 is an improvement over the other two petitions. The petitioner therein has challenged only Clause 5 of the Paraffin Control Order, and the list of allotment furnished to Parry and Co., in so far as he has been given a much lesser quota than what he used to purchase formerly from the company.
6. Numerous grounds have been raised in these petitions. The petitioners are not obviously aware of either the true legal position or the factual position; and naturally the grounds raised by them are bound to be confused and illogical to some extent. The authorities concerned are to a large extent responsible for this state of affairs. They have not even now disclosed fully when and by whom the said list was prepared. There was no public notice regarding the preparation of the said list; and admittedly no notice was given to any of the petitioners. All what they know about the matter is from what is stated in the counter-affidavit filed by the State. Two points alone were pressed by counsel for the petitioners at the hearing. One was that Clause 5 of the Paraffin Control Order is unconstitutional, as it confers an un-guided and arbitrary power on the competent authority in the matter of choice of persons and allotment of quotas for purchase of paraffin wax. The second is that the allotments made are patently arbitrary, in so far as no intelligible or known standards have been adopted in that matter, and so many persons who have not been even purchasing paraffin wax have been now included in the list.
7. I shall first consider the question of the constitutional validity of Clause 5 of the Paraffin Control Order. It is well settled that a law which confers an arbitrary or un-guided power on the executive or any administrative authority is violative of the fundamental right for equal protection of the laws guaranteed by Article 14 of the Constitution -- vide decisions of the Supreme Court in State of West Bengal v. Anwar Ali, 1952 SCR 284 = (AIR 1952 SO 75); Suraj Mall v. Viswanatha Sastri, (1955) 1 SCR 448 = (ATR 1954 SC 545); Meenakshi Mills v. Viswanatha Sastri, (1955) 1 SCR 787 = (ATR 1955 SC 13); Bidi Supply Co. v. Union of India, AIR 1956 SC 479 and State of Orissa v. Dhiren-dra, ATR 1961 SC 1715. It is also equally established that, if the legislative policy is clear and definite and a discretion is vested by the Statute on the executive or administrative authority to make selective application of the law to certain classes or groups of persons as an effective method for carrying out that policy, the Statute itself cannot be condemned as discriminative, but the exercise of that discretion in an arbitrary manner or in violation of that policy can be attacked as offending the right for equal protection of the laws -- vide decisions of the Supreme Court in Kathi Raning v. State of Saurashtra. 1952 SCR 435 = (AIR 1952 SC 123); Kcdarnath v. State of Wrst Bengal, 1954 SCR 30 -- (ATR 1953 SC 404); Jinadathappa v. R. P. Sharma, (1962) 2 SCR 22 = (AIR 1961 SC 1523); Jvoti Pernhad v. Union Territory of Delhi, (1962) 2 SCR 125 --(ATR 1961 SC 1602); Bhikma Yamasa Kshatriva v. Section A. T. B. Kamgar Union, ATR 1963 SC 806 and B. Y. Kshatriya v. Union of India, AIR 1963 SC 1591.
8. Now Clause 5 of the Paraffin Control Order, which has been extracted earlier, prohibits a dealer from selling paraffin wax to any person, except to those who have an order of allotment in their favour by the competent authority. There is no indication either in the said clause or anywhere else in the Order of any policy or principles for guiding the competent authority for choosing the allottees or fixing the quantum of allotment to the persons chosen by him. In other words, the power or the discretion, if it can so called, vested in the competent authority is absolute, arbitrary and naked. And such a power has been vested in the above manner in an executive officer in a matter which would affect the fundamental right of a citizen in carrying on his trade or business. No appeal has also been provided from the orders of the competent authority. An order can be justiciable only if it is one which has to be made in accordance with a procedure or any guiding principles laid down by law. There is no scope for any appeal from an order passed in exercise of a power which is absolute. That is the nature of the power conferred by of the Paraffin Control Order. This is clearly a case which offends the guarantee for equal protection of the laws under Article 14 of the Constitution.
9. The learned Central Government Pleader contended that the policy and object underlying the Paraffin Control Order are discernible from the object of the Essential Commodities Act, 1955, and particularly from Section 3 thereof under which the above Order has been issued by the Central Government. In support of the above contention, he relied on the decision of the Supreme Court in Harishankar Bagla v. The State of Madhya Pradesh, (1955) 1 SCR 380 = (AIR 1954 SC 465). In that case the constitutional validity of Section 3 of the Cotton Textile (Control of Movement) Order, 1948 was challenged on the ground, among others, that it conferred an arbitrary and unguided discretion on the Texfile Commissioner to refuse ot grant a permit for transport of cloth or yarn. In support of that contention, the appellant'd counsel relied on the decision of the Supreme Court in Dwarka Prasad v. The State of U. P., 1954 SCR 803 = (AIR 1954 SC 224) which held that Section 4 (3) of the Uttar Pradesh Coal Control Order was void on the ground that it conferred an arbitrary power on the licensing authority to grant license to a person for stocking or selling coal, and to cancel or modify that license. The Supreme Court rejected the argument, holding that the nature of the two provisions was totally different, and that in the case of Cotton Textile (Control of Movement) Order, the Textile Commissioner had, by notification in the Gazette of India, prescribed the manner in which any application for a permit has to be made, and the Central Government had also prescribed forms for application for obtaining permits and conditions under which permits could be obtained, while in the case of the U. P. Coal Control Order, there were no such provisions to guide OF regulate the power conferred on the licensing authority. The learned Government Pleader, however, relied on the following passage appearing at pages 387-88 of the report:--
"The policy underlying the Order is to regulate the transport of cotton textile in a manner that will ensure an even distribution of the commodity in the country and make it available at a fair price to all. The grant or refusal of a permit is thus to be governed by this policy and the discretion given to the Textile Commissioner is to be exercised in such a way as to effectuate this policy. The conferment of such a discretion cannot be called invalid and if there is an abuse of the power there is ample power in the Courts to undo the mischief. Presumably, as appears from the different forms published in the Manual, there are directions and rules laid down by the Central Government for the grant or refusal of permits."
The learned Government Pleader also relied on the decision of the Supreme Court in the Union of India v. Bhana Mal Gulzari Mal, (1960) 2 SCR 627 = (AIR 1960 SC 475). In that case, the constitutional validity of clause II-B of the Iron and Steel (Control of Production and Distribution) Order 1941 issued under R. 81 (1) of the Defence of India Rules 1939, which was a provision similar to Section 3 of the Essential Commodities Act, 1955 was challenged, on the ground, among others, that it conferred an arbitrary power on the Controller to fix the maximum price for iron and steel. The contention wa" rejected by the Supreme Court In doing so, the Supreme Court stated-
"The preamble to the Act and the material words used in Section 3 (1) itself embody the decision of the Legislature in the matter of the legislative policy, and their effect is to lay down a binding rule of conduct in the light of which the Central Government had to exercise its powers conferred on it by Section 3. The Legislature has declared its decision that the commodities in question are essential for the maintenance and progress of national economy, and it has also expressed its determination that in the interest of national economy it is expedient that the supply of the said commodities should be maintained or increased as circumstances may require and the commodities should be made available for equitable distribution at fair prices. The concept of fair prices which has been deliberately introduced by the Legislature in Section 3 gives sufficient guidance to the Central Government in prescribing the price structure of the commodities from time to time. With the rise and fall of national demand for the said commodities or fluctuations in the supplies thereof, the chart of prices may, in the absence of well planned regulation, prove erratic and prejudicial to national economy, and without rational and well-planned regulation equitable distribution may be difficult to achieve; and so the Legislature has empowered the Central Government to achieve the object of equitable distribution of the commodities in question by fixing fair prices for them. Thus, when it is said that the delegation to the Central Government by Section 3 is valid, it means that the Central Government has been given sufficient and proper guidance for exercising its powers in effectuating the policy of the statute."
Reference was made in the above case to the earlier decisions of the Court in Dwarka Prasad and Harishankar Bagla; and the Court explained the different principles involved in the two cases as was done earlier when rendering its decision in Harishankar Bagla's case.
10. It is proper in this context to refer to the decision in Dwarka Prasad's case, on which reliance has been placed by counsel for the petitioners. Mukherjea, J., in delivering the judgment of the Court stated-
"The more formidable objection has been taken on behalf of the petitioners against Clause 4 (3) of the Control Order which relates to the granting and refusing of licenses. The licensing authority has been given absolute power to grant or refuse to grant, renew or refuse to renew, suspend, revoke, cancel or modify any licence under this Order and the only thing he has to do is to record reasons for the action he takes. Not only so, the power could be exercised by any person to whom the State Coal Controller may choose to delegate the same, and the choice can be made in favour of any and every person. It seems to us that such provision cannot be held to be reasonable. No rules have been framed and no directions given on these matters to regulate of guide the discretion of the licensing officer. Practically the Order commits to the unrestrained will of a single individual the power to grant, withhold or cancel licences in any way he chooses and there is nothing in the Order which could ensure a proper execution of the power or operate as a check upon injustice that might result from improper execution of the same."
It was contended on behalf of the Central Government in the above case that the impugned clause in the U. P. Coal Control Order provided that the licensing authority shall record reasons for granting, refusing to grant, cancelling or modifying any license, and that this was a sufficient safeguard against any abuse of the power vested in him. The contention was rejected, stating that the said safeguard was hardly effective, since there was no higher authority prescribed in the Order, who could examine the propriety of the reasons and revise or review his decision. The position in the instant case is worse, since clause 5 of the Paraffin Control Order does not even require the competent authority to state any reason in making an allotment order. In other words, he can at his sweet will and pleasure choose the persons for allotment of paraffin wax and fix the quantum of allotment. He can also in the same manner refuse allotments to any person. I am unable to find any policy or principle in any provision of the Act to regulate or guide the exercise of this naked power conferred on the competent authority. Fixa-
tion of a fair price and regulation of transport of an essential commodity stand on an entirely different footing from choice of persons to deal in such a commodity. In the former instances, the object of the legislation and the policy underlying it come into operation, but not in the latter instance. The object and policy of the Act by themselves have nothing to do with the choice of the persons, unless the principles to be followed in that matter are specifically laid down.
11. It was contended on behalf of the State Government that the competent authority has laid down guiding principles for the exercise of the power conferred on him under clause 5 of the Paraffin Control Order. In the first place, no such material has been produced in court. He has no case that any such guiding principles have been published by him for the information of the interested public. Secondly, it is meaningless and a contradiction to say that the competent authority has himself laid down principles to regulate the exercise of his power. If there are any such guiding principles, he can himself change them whenever he wants, and in the manner he likes. In this context, counsel for the petitioners referred me to the decision of the Supreme Court in Narendra Kumar v. The Union of India, (I960) 2 SCR 375 = (AIR 1960 SC 430). One of the questions which arose for decision in that case related to the validity of Clause 4 of the Non-Fer-rous Metal Control Order, 1958. That clause which provided that "no person shall acquire or agree to acquire any non-ferrous metal except under and in accordance with a permit issued in this behalf by the Controller in accordance with such principles as the Central Government may from time to time specify" was attacked on the ground that it conferred an arbitrary power on the controller. Certain principles in this respect had been specified by the Central Government and communicated to the Chief Industrial Adviser. But they had not been published in the Official Gazette as required by Sub-section (5) or laid before Parliament as required by Sub-section (6) of Section 3 of the Act. The court held that so long as these two things had not been done, those principles did not come into operation; and clause 4 of the Order, as it stood without any principles validly laid down by the Central Government to guide the power vested in the Controller, was bad under law. This decision is not directly in point; but it shows that any principles which guide or regulate the exercise of a power conferred on an executive must be laid down by the competent authority, and that they would be valid, only if the requirements of Sub-sections (5) and (6) of Section 3 of the Act are complied with. None of these things has been even thought of in the case before me.
12. The next point for consideration is whether the allotment orders issued by the competent authority are discriminatory. Several instances have been referred to in the original petitions, where person who were not formerly using paraffin wax have been given allotment orders, and persons have been allotted much larger quantities than those they were consuming formerly, while one of the petitioners has been refused any allotment, and the remaining two have been allotted much lesser quantities than what they were consuming before. The counter-affidavit has tried to meet these allegations. The Government confessed that errors are bound to happen, and that it is prepared to revise the allotments. In fact, the petitioner in O. P. 1319, who was initially refused any allotment, was given some allotment after this O. P. was filed; and he was given a further allotment subsequently. These things speak for themselves. But the question of discrimination arises only when there is a procedure or some principle laid down by law to regulate the exercise of the power conferred on an authority. Then the enquiry would be whether in the exercise of that power, he has violated that procedure or the principle to the advantage of some and to the detriment of others, If an authority is empowered to do as he pleases, there is no question of discrimination; but the power conferred on him is bad under law. As Justice Mathews said in the well-known American case of Yick Wo v. Hopkins, (1885-86) 118 US 356 action and non-action of officers placed in such position may proceed from enmity or prejudice, from partisan zeal or animoisty, from favouritism or other improper influences and motives which are easy of concealment and difficult to be detected and exposed, and consequently the injustice capable of being brought under covet of such unrestricted power becomes apparent to every man, without the necessity of detailed investigation. Things have changed for the worse. Corruption in the administration control orders is notorious; and it becomes unbearable, when the executive and administrative authorities are vested with arbitrary and naked power in the administration of such orders. Clause 5 of the Paraffin Control Order might have also created the same situation.
13. For the reasons stated above, I declare that Clause 5 of the Paraffin Wax (Supply, Distribution and Price Fixation) Order, 1972 is unconstitutional and void, and quash all proceedings taken by the Director of Industries and Commerce as competent authority under the said clause. Parry and Company will be at liberty to sell paraffin wax to any person subject to the other provisions of the aforesaid Order. These writ petitions are allowed to the above extent. In the circumstances of the case, I make no order as to costs.